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May 21, 2013

Advisors’ Tech Strategies Help Boomers but Ignore Gen X and Y

Fidelity poll finds that two-thirds of BDs and RIA firm executives are primarily focusing innovation strategies on their current customer base

Registered investment advisors and broker-dealers are making the mistake of inventing new strategies primarily for their boomer investors at the expense of developing technological innovations that would better serve their Gen X and Gen Y clients, says a Fidelity Investments poll released on Monday.

Taken at the company’s annual Executive Forum client event, the new poll finds that two-thirds of broker-dealer and RIA firm executives are primarily focusing innovation strategies on their current customer base of boomers, ages 49 to 67, and matures, ages 68 and older. Meanwhile, fewer than one-quarter said they were looking into innovations geared to Gen X, ages 34 to 48, and Gen Y, ages 18 to 33.

“While boomers hold the bulk of the nation’s wealth today, there is a significant wealth shift looming, a transfer of a projected $1 trillion from the boomer generation to Gen X and Gen Y, every year for the next 40 years,” said Michael Durbin, president of Fidelity Institutional Wealth Services, in a statement. “Firms focused on serving their current base, while also anticipating and adapting to changing investor dynamics, may be the best positioned to capture these assets in motion.”

The 15th annual Executive Forum, held April 29 to 30 in Naples, Fla., was attended by more than 300 executives, most of whom are clients of Fidelity’s custody and clearing units, which administer more than $1 trillion in combined assets as of March 31. Fidelity Investments, the financial service giant, has assets under administration of $4.2 trillion, including managed assets of $1.8 trillion, as of April 30.

Parallel Advisors Innovates Use of Salesforce CRM

One Executive Forum participant, 41-year-old Jake Schutt, principal with the San Francisco-based wealth management firm Parallel Advisors, said the Fidelity meeting is a don’t-miss event because it gives him an opportunity to speak with other RIAs about best practices. This year, Schutt spent a lot of time talking about tech with his peers and about the challenges that generational differences can create in terms of practice management.

“Clients don’t need a firehose, they need a dashboard, and we look at the best technology for delivering that to them,” said Schutt, who custodies assets at Fidelity. “If you have lots of older people, they don’t want tech, and if they’re young, all they want is tech.”

Either way, he added, good ideas can come from anybody in the firm. For example, Parallel staffers discovered a new use for the Salesforce.com customer relationship management tool’s companywide social network, called Chatter. Parallel, which has built its platform using the Salesforce CRM, has figured out how to create a private Chatter group that allows the advisor and client to conduct business.

“It’s a way to talk, and this is something the younger generation appreciates, and it allows for a secure exchange of documents,” Schutt said. “The neat thing is we can also bring in the accountant or attorney, and at the end of the day, we can kick them out of the discussion. That’s unique. It’s something Salesforce hadn’t anticipated as an innovation, and it’s something I’ve spoken about at Salesforce events.”

Game Design, Loyalty Programs and Behavioral Economics

Parallel also uses Salesforce to combine dashboards with gaming. (Gabe Zichermann, chief executive officer of Gamification Co. & Dopamine Inc., was a speaker at the Fidelity event, where advisors were urged to consider applying innovations from game design, loyalty programs and behavioral economics to help drive greater engagement with prospects, clients and employees.) The firm uses a point reward system using data tracked by Salesforce, based on how many interactions an employee has with a customer.

“I can see what every advisor is doing in terms of metrics, so it makes everything very transparent,” Schutt said.

According to the Fidelity poll, almost half of firm leaders rely only on the executive team to generate new ideas, even though these leaders recognize that good ideas can come from anywhere. One-quarter reported that “the most passionate employees” generate the majority of new ideas.

“Fresh insights and new approaches exist in the minds of nearly all employees. The question is: are they being shared?,” said Sanjiv Mirchandani, president of National Financial, a Fidelity Investments company, in a statement. “Fostering cultures of innovation, which create the energy and openness to enable people to share and promote new ideas, may ultimately help drive the greatest growth in the financial advice business.”